Commit to save more: You are worth the investment!

There are 6.75 million active loans in the country and 4.5 million active credit cards.

Less than 10 per cent of us are able to follow through on New Year resolutions. We fail because of a phenomenon behavioural economists refer to as 'present bias' - a tendency to procrastinate because our mind inadvertently favours immediate rewards at the expense of our long-term objectives.
Individual financial betterment involves a mix of these elements: enhance earnings, save more and break free from debt obligations. The economic reality is that UAE residents generally don't fare particularly well on these.
According to the Al Etihad Bureau, there are 6.75 million active loans in the country. Add to those, 4.5 million active credit cards. That's an aggregate amount of over Dh350 billion in unsecured personal debt owed by UAE residents. HSBC's 'The Future of Retirement 2015' report revealed that saving doesn't seem to be a priority for residents in the Emirates.
A high level of individual indebtedness, a subdued savings rate and a low penetration in terms of pension, insurance and savings plans contribute to the current personal finance landscape in the UAE. We need to plan more effectively and secure our financial future.
Start 2016 on the right track:
1. Set your financial goals: Make sure they are realistic. Your goals should encompass foreseeable expenses such as annual car insurance renewals, travel and school fees. It should also include longer term goals such as wealth accumulation and retirement. This is relevant for expats in the UAE who do not have any pension entitlements.
2. Track your spends: If you don't know where you are spending, you will never be able to identify how you can do better. Most people I talk to will know their most chunky outflows like rent and loan installments, but will very quickly get to 'other miscellaneous stuff' - and that's where you have the most room to optimise. There are some mobile apps that will allow you to log everything in real time. Check out Expensify or Pocket Expense Pro. I found out that my casual cappuccinos cost me over Dh1,800 a month!
3. Build a plan to get there: Once you've set your goals and understand how you are spending, devise a plan that works for you. Will you save by controlling impulse purchases or eating out a little less? You don't have to stop doing things you like. If you enjoy working out a gym or playing golf, use a credit card that offers these at no cost! If you need to shop, do your research and wait for a sale.
4. Stay within your budget: "Don't save what is left after spending; spend what is left after saving." Warren Buffet's simple but powerful quote sums this one up.
5. Reduce debt and borrow wisely: Every dirham spent on servicing interest is a dirham that you could have saved. Let's say you have an outstanding balance of Dh25,000 on your credit card and you service the minimum due every month. At a monthly interest rate of three per cent, you will have paid Dh38,800 in four years, but would still have an outstanding balance of over Dh9,600. The cost of interest would be over Dh23,000.
6. Invest to preserve and grow savings: What do you do with your savings? There is a myriad of options available to UAE residents ranging from local savings accounts to picking individual stocks anywhere in the world.
7. If you fall off the wagon, get right back on: It's ok to falter once a while. The vital thing is that you get back on.
The New Year is an opportunity to break free and empower yourself. Apart from overcoming the present bias and basic financial management tips, there are additional factors that your planning will need to consider if you are a borrower. Flagging oil prices, increased focus of banks on liquidity, and the recent US Fed rate increase present challenges that will seep through into your personal financial budgets.
Rise to the challenge and commit to ending the next year with more financial strength. You are worth the investment.
The writer is the head of consumer finance at Noor Bank. Views expressed are his own and do not reflect the newspaper's policy.